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Why Marketplaces Are the Future of Commerce

You’ve seen the business headlines:

Top five retailers on the death watch

A roundup of 2017’s retail carnage

Who will the retail apocalypse claim next?

As news outlets continue to report on the movement that’s shuttering traditional brick-and-mortar stores left and right, consumers are heading online to Amazon, Alibaba, and eBay. In fact, those three sites alone accounted for over $350 billion in sales last year, according to Euromonitor. In 2016, 50% of all consumer retail came from marketplaces, according to a Forrester Report. For retailers and brands, that’s a strong insight to consider and adapt to in the new year.

So why are marketplaces primed for world domination? Why now? And what should a retailer look for when searching for the right platform for their needs? The ecommerce landscape is changing at a quickening pace. Here’s why online marketplaces are the future of commerce:

The world is getting smaller

Globalization continues to change the way we live. It also changes the way we shop. Our vision at Reaction is to connect and democratize the world through open commerce. What better way to do so than through a global marketplace?

Thanks to the online marketplace, our world is more interconnected than ever. Split order processing and shipment on Amazon and Etsy allow merchants and shoppers to exchange goods from all around the world through one unified checkout experience. And for the marketplace owner, there are now choices. Without the overwhelming limitations of cost and development time, niche marketplaces, big and small, are launching left and right.

Here’s another possibility: what if every marketplace was connected, regardless of platform? Imagine a retail landscape where every catalog across all platforms is connected, regardless of where that store might be located. Merchants can open up a shop on Etsy, open up a shop on a niche marketplace, and have all their products from Etsy on that niche marketplace, and vice versa. A universal catalog across all marketplaces is a truly global concept.

More options, more flexibility

If you’re a retailer looking to participate in the marketplace model, then you’re probably looking to do one of two things: 1) become a merchant on a third-party marketplace, or 1) become an owner of your own marketplace.

For merchants, joining an online marketplace yields clear benefits. Selling on a third-party platform grants you access to that platform’s marketing tools, delivery platform, technology infrastructure, and, most importantly, their customer base. Building a customer base takes time. Growth marketing can get expensive. For many merchants, joining a marketplace circumvents the cost of customer acquisition, the cost of building an online storefront, and the cost of maintaining that property through dev time and hosting.

But what if you see an opportunity to build something more? What if you identify a real need in your market to bring sellers and shoppers together (more on that below!)? The second option, the option of starting your own marketplace, is a growing ecommerce model that brands like Crate & Barrel have already adopted. Running your own marketplace comes with its own set of challenges, but at the end of the day, you get to exercise full control of the product catalog, the user experience, and the profit margins.

Today, many industries are experiencing high market fragmentation: many suppliers, many buyers, a relatively low barrier to entry, and few big players. The restaurant industry is a good example of this. Now, there are more options than ever, which makes it even harder for shoppers to find the product they’re looking for, and for merchants to find their loyal customer base.

That’s where the online marketplace comes in: when there is a true need in the market for buyers and sellers to find one another, the marketplace model serves as a discovery platform.

In the past, users have likened their Amazon shopping experiences to that of an endless aisle, lined with an infinite number of choices, an infinite number of products. But thanks to search filters, recommendation engines, and a bit of human curation, the online marketplace takes their product search and funnels all of it into a one-of-a-kind, personalized experience.

The road ahead

For retailers looking to avoid yet another casualty of the apocalypse, it's crucial to keep up with the times. Do your customers use third-party marketplaces? If so, how readily are you able to adjust your current commerce infrastructure to accommodate the way they shop?

As marketplaces continue to take over, we expect the retail space to experience new growing pains. There’s no better example of this than Amazon, where, for instance, the ability to verify brand authenticity is largely absent. As more and more marketplaces pop up to compete, how will they protect shoppers against counterfeit products? Marketplaces are now the new retail battleground. Let’s see what happens next.

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